Life Assurance

The Many Faces of a Life Assurance Policy

Life assurance is common knowledge. 9 out of 10 people would tell you that a life assurance policy provides a guaranteed payout upon the death of an insured individual. Everybody knows that. However, not everyone knows that life assurance policies can be used in a lot of different ways. Below are some of the ways you can use your life cover policy that most people aren’t aware of.

Retirement income

When a claim is made on a life cover policy and it pays out, it can either be a payout in lump sum or it can be paid through installments. Receiving the money in lump sum is the more common choice between the two options because large amounts of money are often needed to pay medical and burial expenses. However, not all life assurance policies are for someone’s death. You can receive a payout even if no one dies. Such is the case when you purchase an Endowment. An endowment is a type of life insurance that provides a payout upon the death of the insured, or when it reaches its maturity period, whichever comes first. Typically, endowments have durations of 10 and 20 years. Some insurance companies even go as far as providing endowments that mature when you reach age 60 or 65, just in time for your long-awaited retirement.

Estate planning

When a breadwinner dies, he automatically leaves a lot of expenses for the family to incur. This is called Estate Tax. In the UK, estate tax includes all of the deceased’s assets, whether real estate or personal estate, and any gifts made by the deceased within his last 7 years. This means his home, savings accounts, investments, even his car, will be taxed. It’s impossible to put a stop to this but you can definitely cushion its blow by taking out a life assurance policy that would exclusively pay for these taxes when you die.

Collateral

Since a life assurance policy contains a cash value (not all), many creditors prefer this as debtor’s collateral. Not only is it completely legitimate, but it’s relatively easy to cash out. You can use your life assurance policy as collateral by simply declaring your creditor as your new irrevocable beneficiary.

Investment

If you want to invest your hard-earned money but don’t know where to start, you can try investing it in a life assurance policy because it is simple and risk-free, perfect for the not so investment savvy person. Insurance companies offer a dividend-earning feature that allows you to get a hold of its excess earnings. This is given at a certain percentage of your policy’s current cash value. You may wish to withdraw the dividends on an annual basis, or let it accumulate and reinvested in order to enjoy more of it later on.

Apart from the cash value, there is also the dividend-earning feature that allows you to get a hold of the company’s excess earnings. This is given at a certain percentage of the amount of your cash value on the same year the dividends are declared. With this feature you’re basically like a stockholder but without the ownership rights in that you can only participate in the company’s investments, but can’t vote or sell stock. GP